hi, everybody, welcome to "the wall street journal report". what does a second term for obama mean for the economy? i'll talk to advisers and find out if they think we can avoid the fiscal cliff. and how to position your investments, stay safe and find the right sectors in the market. and outspoken banker jamie dimon of jpmorgan chase. too big to fail. "the wall street journal report" begins right now. >> this is america's number-one financial news program. "the wall street journal report." now, maria bartiromo. >> here's what's making news as we head into a new week on wall street. if investors thought we would be getting a certainty bounce after the election, they thought

wrong. in fact, president obama's second-term victory was greeted with stocks second worst day of the year. triple digits again thursday, and figures were mixed thursday. the possibility of a u.s. downgrade if america goes over the so-called fiscal cliff. but said it would wait until after budget negotiations. a downgrade, of course, would make it more expensive for the united states to borrow money. superstorm sandy could provide an economic boost to the auto industry. as many as 250,000 new and used cars may have been ruined by sandy. a loss that could eventually lead to a spike in auto sales. overall consumer borrowing expanded in the month of september, but at a slower pace than the previous month. a sign buyers may be pulling back on their credit card purchases. this is an important data point, because consumers and consumer spending make up more than two-thirds of the u.s. economy. what will a second term for president obama mean to the

economy? will we see compromise? or will we fall over the fiscal cliff? joining me now, two former top presidential advisers. laura tiesson, chair of economic advisers for clinton and marty feld stein under president reagan. thanks so much for spending the time today. >> thank you. >> good to be with you. >> so marty, both sides appear to be extending an olive branch when it comes to this fiscal cliff. do you think we will actually reach a compromise, and if so, how and when? >> sure hope so. because the consequence of not reaching a compromise for the american economy, the world economy, next year, would really be disastrous. we would be talking about a very deep recession. if we went over the cliff and didn't quickly bounce back from it. >> laura, you think there is a two-part solution, right? what do you mean by that? >> well, what i mean by that is we have the fiscal cliff, and then we have the need to get a long run compromise plan on

deficit reduction over the next decade. i think we have to be realistic that the possibility of getting this long-run plan over a six-week period, eight-week period with a lame duck congress, that's a pretty low probability event. so i think we have to think about this as can we find a way to negotiate a deal which gets us through the cliff. that deal says something about the framework and the content of the ten-year deficit reduction plan. so my view is get through the cliff first, got to get a temporary deal to that. otherwise all the risks that marty says are very, very serious. but that has to be linked with the -- the outline, the framework, for a ten-year deal. >> you know, i think -- >> another way of doing it is to have a -- a postponement for, say, six months. and then if they don't reach a major compromise, the kind of ten-year plan that laura talked about, to have a more constructive thing than the kind of cuts that are involved in the

cliff. >> it seems so silly and petty to just fight over taxes. but i've got to say, i've been optimistic these last few days hearing from both sides. you have to say that both sides seem ready to deal. >> and i think that's the right way to go, to not push the tax rate up, but to raise revenue by broadening the tax base, by putting an overall limit, an overall cap on the extent to which individuals can benefit from these tax expenditures. >> i actually think that all of those comments were very promising, and i think the path that marty has suggested is one very reasonable path and needs to be considered. my concern is that the fiscal cliff involves those tax rates that -- for the top 250,000 a year and higher, and that's where you have the biggest

cleavage between the right wing and the left wing, with some people on the left saying we should do the fiscal, we should basically let the cliff go over the cliff, if we cannot can raise those rates. and others on the republican side saying that is the last thing we will do. so i think we may have to essentially get through the kind of temporary extension arrangement, which gets that cleavage off the table. >> you know, it's interesting what's going on, because now we're sort of right at the precipice once again, and we're finally seeing some real ideas to compromise. let me ask you about the idea of a recession, because most economists do agree, if we do go over the fiscal cliff, we will dip into recession in 2013. do you both agree with that? >> absolutely. and it would be a very serious one if we go over and it's not just technical thing where after a couple of weeks we reverse and put taxes back where they had been before. but that jump in taxes, the cbo

tells us will take some $600 billion out of the economy next year. about 4% of gdp. >> yes, i completely agree. and it's causing -- it really is causing significant uncertainty in the business community. there's already evidence of changes in investment strategies and in employment strategies, because of the uncertainty around awful those very large spending cuts, particularly in defense that would occur next year as part of the cliff, if we go over the cliff. so this is very, very dangerous. and i think we have just all have to keep repeating that policymakers cannot, should not -- it would be irresponsible to hold the u.s. economy hostage, particularly if it's one around a very narrow issue, which is the top tax rates for a relatively small percentage of people. >> let me ask you about the second-most pressing issue, of course, and that's jobs. employment. what should the second obama

administration do to encourage job creation? marty. >> well, i think getting the uncertainty of higher taxes off the table would help. i think corporate tax reform would also help. president obama has said that he would bring the top rate down, the corporate rate down from 35% to 28%. well, that would get us in line with the major european economies. so that would be a good thing. and if we took the next step and went to the kind of international tax rules that every other industrial country has, the so-called territorial system, that would encourage american firms to bring back some of the literally more than $1 trillion of funds that they have sitting outside the u.s. economy. >> what about the health care legislation, laura? now that president obama has been re-elected, we know obamacare, the affordable care act is not going anywhere. after all this debating about it. what impact do you think that will have? >> first let me underscore my

agreement with marty. he knows this, we worked together on corporate tax reform, and i think it would be very important and maybe an area of tax reform where it's easier to get agreement among centrists, democrats and republicans, is in the corporate area. on medicare, i -- you see, i'm optimistic, or on health care, if you look at the phase-in, what the cbo has said here is over the first decade of obamacare, we'll save about $100 billion. now, that's not a lot of money, but we will be insuring 30, 40 million additional americans. but their projection receipt now is that in the second decade, we will shave off the right of growth of health care spending about 1 d$1 trillion from the medicare deficit. that's really good news. we could phase-in a lot of the reforms in obamacare more quickly, such as the accountable care organizations and make those savings occur even sooner.

>> marty, laura, great to talk to you. thanks for talking with us today. >> good being with you. >> marty phelps and laura tyson. >> we talked about the economy under a second obama presidency. but what about the markets and your money? we'll find out the smartest vesting moves you can make and how to protect yourself. then, when you think bankers, you think jamie dimon. my interview with the chairman and ceo of jpmorgan chase. we'll talk regulation, politics and policy. as we take a break, take a look at how the stock market ended the week. back in a moment.

en we got marr. i had three kids. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy. so, as we go into this next phase, you know, a big part of it for us is that there isn't anything on the schedule. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up.

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well, that big thud you heard on wednesday was the stock market plunging, having its worst day of the year. it's greeting to news to the second term for president obama. how can you protect your money and is this likely to be a short-term blip or long-term problem? joining me is jack avalon, good to have you on the program, thanks for joining us. >> thanks, maria. >> what a greeting the markets gave president obama's re-election, that huge selloff. do you think this is the case of political nerves, fundamental problems with the market? what was behind that, and is it sustainable and long-lasting? >> i think it was an initial reaction just to these, you know, revelations of new regulations, new taxes, things like that. if approximate you look at the sectors that were hardest-hit were financials, because of the -- you know, tighter regulations, tougher to do business. but also energy. same thing on the coal and the environmental side there. so i think those two were kind

of what i'll call a reset. >> so would you buy into this selloff, or do you want to take to the sidelines? i mean, the market -- let's face it, the market has done extremely well under president obama. realize it's also partly the free money and the stimulus from the federal reserve that has driven the market. but the nasdaq up nearly 90%, the dow up 50%, s&p 500 up 60%. so was this an overreaction, and would you look for opportunities to get in? >> well, you know, i think, you know, i would say fundamentally, we're looking for s&p earnings of about $100 a share next year. so that is somewhat lower than what year -- total year 2012 will be, we're also below consensus. but even still, $100 a share should support 1,400 in the s&p, which is higher than it is right now. should support 1450, potentially even 1500. so, you know, i would say we're an arranged bond market in the u.s., and really, it's going to be subject to a lot of these headlines that we're going to read. >> what sectors do you think will go -- do well under an

obama presidency? what do you want to avoid, and what about those dividend-payers and banks, as well? >> sure. probably they -- i would say the sector most insulated from increased regulation in the dividends would be technology. generally technology isn't a very heavily regulated industry anyway. and they don't really pay a very high dividend. >> the question is, are we going to continue to see an end of year selloff as investors try to lock in profits when tax rates are lower versus next year when they, of course, will go up. but how high will they go up on the dividend-payers. >> sure. you're right. right now, you know, president obama's proposal would be to have dividends taxed at ordinary income. that would be substantially higher tax rate than the 15% tax rate that investors are enjoying right now. and, you know, either way, we do think that dividend yields will ultimately get dinged. as you mention, they have gotten hit, they were down something like 3% in the weekended right

before the election. so even in anticipation of that. you know, it's hard to know. i mean, remember, a lot of dividends stocks are held in tax-exempt accounts anyway. 401(k)s, endowments, pensions. so we're dealing with a subset here. so my sense is we're not going to see a full pullback, because, again, a lot of dividends aren't taxed to the extent you would think. >> all right. jack, good to have you on the program. thanks so much. >> thank you, mar yeah. >> jack avalon joining us. up next on "the wall street journal report" he runs what many think is the strongest bank. but what life being like for jamie dimon and the next four years. my question, his answers. and you can find us on facebook/mariabartiromo. if you think running a restaurant is hard,

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well, if you want to know what jamie dimon thinks, just ask. the outspoken chairman and ceo of jpmorgan chase is an important voice for the financial industry. and he is not short of opinions. i spoke with him this week about politics, policy, and regulation. >> the foundation of business is actually pretty strong. companies are in very good shape, a lot of cash, middle market companies, small business. if you look at the numbers, housing looks like it's turning. household formation is going up. consumers are still spending.

so business itself looks pretty good. and i think the american economy, hopefully -- to me, the most important thing, we solved the short run fiscal cliff and the longer run fiscal issues. i personally think if we do that, the economy will boom. and i hope president obama works on that and has been working on that. >> what are the implications of going over the fiscal cliff? you've been very vocal on this subject. you created a task force, have taken a lead in terms of the fix the debt. what are the implications of going off that fiscal cliff and not getting anything done by year-end. >> jpmorgan is one of 100 or 200 companies getting involved in fixing the debt. there's the long run. so fix the debt is a permanent thing, more like a simpson/bowles solution. we need a solution. i think business generally has been supportive of a solution that fixes the problem. we're not religious about all the issues about taxes and spending. we just want a rational, thoughtful solution. the immediate one is this cliff. which is december 31st, midnight, $600 billion coming into the economy, static

analysis saying the economy drops by three or four percent. unfortunately, the world is not static. what may happen is before december 31st, you could see the effects. and also, it might be worse than 300%, because as people react and try to protect themselves from a possible and pending recession. >> clearly, dodd/frank, volcker issues, they don't go away. now under president obama. the question is, do they get worse? if, in fact, with we see elizabeth warren on the senate banking committee. what's your take? >> i had a fine relationship with elizabeth warren, called her to congratulate her for winning her election. we worked together well at the cfpb. we are going to meet all the rules, all the requirements in the spirit and the letter of the law. the most important thing to me is while doing that, we serve all the corporations we have here for consumers, businesses. and you know, for the most part, those things may change. pricing, some returns and some businesses. but i think we can meet them all. the only one that actually has -- we want to be very cautious about is where jpmorgan isn't allowed to freely compete on the same bases, same terms as

deutsche bank or chinese bank. that's all. >> is there a way to work together, collaboration between business and the political story? you said yourself at the top of this industry, business is doing well. all we need to do is unlock that. >> yeah. so listen, i just came back from a two-week trip in asia and silicon valley, entrepreneurs and larger companies and social media and digital. asia has great growth opportunities. this is the greatest economic engine ever built. when you go around here, the innovation, the growth, the work ethic, the capability, the ability to spend capital expenditures, america is still the best there is. and so to me, this is the greatest engine. it's growing slowly. it's waiting to be ignited. i have enormous respect for the president. i think that business and government collaborating has a much better chance of igniting this engine than antagonist behavior. and a very senior official asked me at one point, president obama is re-elected, can it be fixed. of course. most ceos i want to know want to work with government.

they want to make things work, they want to create jobs, opportunity for everybody. so, you know, hopefully that needle will go back and it will take everyone a little bit to say let's just start collaborating. >> what about housing? the last time we spoke i guess a year ago, maybe more than that, actually, you said that housing has bottomed. you still stand by that? >> yeah. because every single thing but housing is flashing green. there is not one thing flashing red. we're creating 3 million more americans every year. homes for sale is now six month supply, not 12-month. the shadow inventory which is still high has been coming down. banks are better at short sales, all-time affordability of homes and mortgages. home prices in the worst markets are now up. phoenix, i gather is up 20 or 30%. >> vegas is up, miami is up, sacramento is up. now, it's not going to be an absence of a strong economy. the economy will drive housing. but if we get the economy going, housing is turned. but another really important thing for people to remember, if housing goes back to normal

building, 1.3 million units a year, 1.4, okay, which most of the economists say we have to do soon, because remember, we've added 15 million americans the last five years or so, that's going to add 2 million jobs right there. right there. so housing could actually become the thing that starts driving -- help drive the economy if we get this economy going. >> you've got all of these technology ceos and social media new technology ceos meeting together in this conference. why is this sector so important to you? is that where the vibrancy in business is today? >> sure. one of them. remember, we still do basic banking like loans, but we have 12 million mobile accounts now. people moving money, you can take pictures of checks and have them deposited, quick pay to move money to your friends and debit your credit card account or checking card account can. these services are going to grow very rapidly. and so i've been -- meeting folks making sure they understand we're geared up for it. but online banking, electronic changes, that's been happening my whole life.

this is just another huge wave of things to make it easier and is better for customers. and we have to do it. so we will be investing huge amounts of our time and money in making sure we serve customers properly and in the mobile and digital world. >> my thanks to jamie dimon. up next on "the wall street journal report," the news that will have an impact on your money. and attention walmart shoppers. why your turkey day schedule may be different from everybody else in your family. stay with us. quent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day... block the acid with prilosec otc and don't get heartburn in the first place! [ male announcer ] one pill each morning. 24 hours. zero heartburn.

for more on our show and guests, check out the website, wsjr.cnbc.com. and i hope you'll follow me on twitter and googleplus. now a look at the stories coming up in the week ahead that may move the markets and impact your money this week. earnings reports out from dow components, home depot, walmart and cisco. cisco cast co was downgraded friday. banks closed monday. on wednesday, we get the open market committee's latest meeting. we will also get the retail sales numbers for the month of october, a sign of how well the consumer is doing. and the producer price index out next week, a measure of inflation on goods produced. thursday, we get the consumer price index, which measures inflation for consumers. and finally, if you were planning on watching football after thanksgiving dinner this year, well, you may want to reconsider. walmart says it will kick off its holiday sales rush at 8:00 p.m. on turkey day this year. the world's largest retailer is

betting on the eagerness of consumers to spend big this holiday season. a critical time of the year for what amounts to a quarter of walmart's annual sales. we may have to actually rename black friday. that will do it for us today. thank you so much for joining me. join me next week. we'll be talking about america's crucial and plentiful energy source. natural gas, fracking, and the environment. each week keep it here where wall street meets main street. have a great week, everybody. see you next weekend.